ISM's Manufacturing PMI at 57.1% in March

Supply executives said order backlogs continued to expand.

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TEMPE, Ariz. — Economic activity in the manufacturing sector grew in March and the overall economy achieving a 22nd consecutive month of growth, the nation's supply executives said in the latest Manufacturing ISM Report On Business.

The report was issued Friday by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management Manufacturing Business Survey Committee.

"The March Manufacturing PMI registered 57.1%, a decrease of 1.5 percentage points from the February reading of 58.6 percent," Fiore said. "This figure indicates expansion in the overall economy for the 22nd month in a row after a contraction in April and May 2020. This is the lowest reading since September 2020."

  • The New Orders Index registered 53.8 %, down 7.9 percentage points compared to the February reading of 61.7 percent.
  • The Production Index reading of 54.5% is a 4-percentage point decrease compared to February's figure of 58.5%.
  • The Prices Index registered 87.1%, up 11.5 percentage points compared to the February figure of 75.6 percent.
  • The Backlog of Orders Index registered 60%, 5 percentage points lower than the February reading of 65%.
  • The Employment Index figure of 56.3% is 3.4 percentage points higher than the 52.9% recorded in February.
  • The Supplier Deliveries Index registered 65.4%, a decrease of 0.7 percentage point compared to the February figure of 66.1%.
  • The Inventories Index registered 55.5%, 1.9 percentage points higher than the February reading of 53.6%.
  • The New Export Orders Index reading of 53.2% is down 3.9 percentage points compared to February's figure of 57.1%.
  • The Imports Index registered 51.8%, a 3.6-percentage point decrease from the February reading of 55.4%.

"The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment," Fiore continued. "In March, progress was made to solve the labor shortage problems at all tiers of the supply chain, which will result in improved factory throughput and supplier deliveries."

Panelists reported lower rates of quits and early retirements compared to previous months, as well as improving internal and supplier labor positions. March brought back increasing rates of price expansion, due primarily to instability in global energy markets. Suppliers are not waiting to experience the full impacts of price increases before negotiating with their customers.

Panel sentiment remained strongly optimistic regarding demand, with six positive growth comments for every cautious comment, down from February's ratio of 12-to-1. Demand expanded, with the (1) New Orders Index remaining in growth territory, supported by weaker growth of new export orders, (2) Customers' Inventories Index remaining at a very low level and (3) Backlog of Orders Index continuing in strong growth territory. Consumption (measured by the Production and Employment indexes) grew during the period, though at a slower rate, with a combined minus-0.6-percentage point change to the Manufacturing PMI calculation.

The Employment Index expanded for a seventh straight month; panelists indicate their ability to hire continues to improve, to a greater degree than in February. Challenges with turnover (quits and retirements) and resulting backfilling continue to plague panelists' efforts to adequately staff their organizations, but to a lesser extent compared to February. Amid signs of staffing and supplier delivery improvements, production expanded at disappointing levels, likely due to timing issues. 

Inputs — expressed as supplier deliveries, inventories, and imports — continued to constrain production expansion. The Supplier Deliveries Index again slowed, but at a slightly slower rate in March, while the Inventories Index increased at a slightly faster rate and the Imports Index grew at a slower rate. The Prices Index increased for the 22nd consecutive month, at a dramatically higher rate compared to February.

"Five of the six biggest manufacturing industries — Food, Beverage & Tobacco Products; Machinery; Transportation Equipment; Chemical Products; and Computer & Electronic Products — registered moderate-to-strong growth in March," Fiore said. "Manufacturing performed well for the 22nd straight month, with demand registering slower month-over-month growth (likely due to extended lead times) and consumption softening slightly (due to labor force improvement). Omicron impacts are being felt by overseas partners, and the impact to the manufacturing community is a potential headwind."

Fifteen manufacturing industries reported growth in March, in the following order: Apparel, Leather & Allied Products; Furniture & Related Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Machinery; Textile Mills; Transportation Equipment; Fabricated Metal Products; Paper Products; Chemical Products; Computer & Electronic Products; Nonmetallic Mineral Products; Primary Metals; and Plastics & Rubber Products. The two industries reporting a decrease in March compared to February are: Wood Products; and Petroleum & Coal Products.

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